Hong Kong / Singapore: Stocks in China and India offer “good bargains” after declines this year dragged down valuations in Asia’s two largest emerging markets, Templeton Asset Management Ltd’s Mark Mobius said.
“We’ve been rearranging the portfolio based on valuations, which have come down pretty dramatically in places like India and China,” Mobius, who oversees about $47 billion (Rs2 trillion) of emerging-market equities as executive chairman of Templeton, said in an interview from Toronto. “There’ve been big declines.”
Bottom fishing: A file photograph of Templeton Asset Management’s Mark Mobius.
The two nations are the worst performers among the world’s largest stock markets this year as soaring raw material prices and slowing economic growth weigh on profits. Benchmarks in the two nations had surged 162% and 47%, respectively, in 2007.
China’s CSI 300 index is valued at 21 times reported earnings, near the lowest in more than two years, and down from a peak of 53 times in October. In India, the Sensitive index, or Sensex, is trading at 14 times reported earnings, down from a high of 31 times earlier this year. That compares with a multiple of about 22 times for the Standard and Poor’s 500 Index in the US.
Mobius joins investor Jim Rogers in favouring Chinese stocks. Rogers, who said he hasn’t sold any of the Chinese equities he started buying in 1999, told investors on 28 June not to “give up” on the nation’s stock markets.
The Chinese stock benchmark is the third worst performer among the 88 global indexes tracked by Bloomberg, plunging 42% this year in dollar terms on concern that the cooling economy, which expanded last quarter at the slowest pace since 2005, will dampen profits. Only indices in Vietnam and Iceland have posted larger losses.
In Hong Kong, the Hang Seng China Enterprises Index, which tracks the so-called H shares of Chinese firms, has lost 23% this year and is valued at 16 times reported earnings.
Marc Faber, publisher of the Gloom, Boom & Doom Report, disagrees with Mobius and Rogers. The investor, who asked investors to bail out of the US stocks before 1987’s so-called Black Monday crash and correctly predicted last August the US would enter a bear market, said on 4 July that investors betting on a rebound in China’s tumbling stocks are setting themselves up for more losses.
In India, the Sensex has lost 37% this year as inflation accelerated to the fastest pace in 13 years and economic growth held at 8.8%, the weakest pace since 2005. The benchmark Sensex closed at 14,104.20 points, up 254.16 points or 1.84%, on Tuesday.
Stocks in other emerging markets are still cheaper. The MSCI Emerging Markets Index is valued at 13 times reported earnings and traded at about 12 times last week, the lowest since July 2006. The benchmark has dropped 17% in 2008, and fell to an 11-month low on 16 July.
Mobius added he favours shares in Brazil and Russia because the two markets can be-nefit from the demand for energy and other raw materials.
“Russia and Brazil are pretty much in the same position,” Mobius said. “Both of those areas are swimming in excess liquidity, which will drive consumer prices as well,” he added.
Leslie Tan in Singapore contributed to this story.